Shares of Affymax Inc AFFY.O fell 85 percent after it said serious adverse reactions, including death, were reported among some of those using its sole commercial product, anemia drug Omontys.
Affymax and its marketing partner Takeda Pharmaceutical Co (4502.T) were pulling back all lots of the injectible drug due to the side effects that included a potentially fatal allergic reaction, anaphylaxis, Affymax said on Saturday.
The adverse reactions were observed only in cases of intravenous use of Omontys.
Omontys was approved last March for intravenous and subcutaneous administration to treat anemia in adult chronic kidney disease patients undergoing dialysis. Nearly all of Affymax's third-quarter revenue of $13.6 million came from the sales of Omontys.
"We no longer have sufficient clarity on the viability of Omontys as a commercial product to reasonably project any future sales revenues," MLV & Co analyst Ed Arce wrote in a note to clients.
He said Affymax "has no pipeline to speak of" apart from Omontys, cutting his rating on the stock to "hold" from "buy".
If the U.S. Food and Drug Administration were to withdraw its marketing approval for Omontys, Affymax would quickly need reorganize and conserve cash for any potential business development opportunities, Arce said.
Steve Brozak of WBB Securities said the company's options ranged from not reintroducing the product to reintroducing it with restrictions.
Shares of Amgen Inc (AMGN.O), which markets a rival anemia drug Epogen, rose 5 percent to $91.25.
A significant advantage that Omontys has over Epogen is that it needs to be administered just once a month while Epogen needs to be given about three times a week.
Some analysts said pulling Omontys completely from the market would significantly lower competition for Amgen's drug. Epogen sales had fallen 5 percent in 2012 to $1.94 billion.
"We estimate an incremental $300 million to $500 million per year in Epogen sales through 2016," Piper Jaffray's Ian Somaiya wrote in a note, cutting Affymax's stock to "neutral" from "overweight".
Robyn Karnauskas of Deutsche Bank said she did not expect the Affymax issue to be resolved this year and raised her estimates for Epogen sales by $93 million to $1.81 billion for this year.
Further, the recall could also affect the approval prospects of biosimilars to the drug, WBB Securities' analyst Steve Brozak said. Biosimilars are drugs that work similarly to another at the biological level.
Despite the set back for Affymax, other competitive risks to Amgen remained, Morgan Stanley's Marshall Urist wrote in a note to clients. Roche's ROG.VX Mircera could launch in mid-2014 and biosimilars in May 2015 or later, he added.
Affymax shares closed at $2.42, down 85 pct from Friday's closing price of $16.52, in heavy trading on the Nasdaq, while those of Amgen closed up 3 percent at $89.55.
(Reporting By Pallavi Ail, Zeba Siddiqui and Vrinda Manocha in Bangalore; Editing by Sreejiraj Eluvangal)